Pound falls as Brexit deal reportedly hangs in the balance

Technical Analysis

Author: Justin Low | gbpusd

EU chief Brexit negotiator, Michel Barnier, reportedly told EU envoys that there may not be a Brexit deal

GBP/USD H1 02-12
The headlines sent the pound lower on the day as we see price test its 100-hour moving average (red line) @ 1.3356, falling from the highs of around 1.3440 earlier.

The retreat in cable is also seeing the greenback pare some of its mild losses, which was relatively brief, to start the session with EUR/USD having moved up to 1.2088 only to fall back to 1.2066 currently.

Back to cable, buyers are losing some grip in the upside momentum as the 1.3400 handle is now broken. That puts the focus back on the key hourly moving averages with the 200-hour moving average (blue line) @ 1.3347 a key one to watch.

Keep above the confluence of the near-term levels @ 1.3347-56 and buyers will retain a more bullish near-term bias but break below and that will see sellers resume control.

As for Brexit, the narrative appears to be that both sides are still selling the notion that negotiations are proving to be "extremely tough". The key outstanding issues i.e. fisheries, governance and level playing field are still unresolved.

However, both sides could still be playing up having to engage in a tough battle as part of the political theater as it is tough to imagine both sides just calling it quits.

The argument that they may lean back on some technicality at the end of it all is still a compelling one in my view and with this being a market that is just itching to buy the pound, that could help underpin the quid to fresh highs if it happens.

For now though, we'll see how things go but keep an eye on the key near-term levels above as they will be a strong indicator of bias in the sessions ahead.

A break below the key hourly moving averages will open up a potential move back towards support at 1.3290-00 in a jiffy to test buyers' resolve even more.

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